For a number of quarters in Twin Cities Rental Revue we have tracked the impact of the shadow market on apartment rents. We have observed that in instances where apartment rents meet or exceed shadow market rents, apartment rents often appear to drop below those of the shadow market (hence, the "Shadow Market Ceiling"). This is merely an observation we have noticed a number of times. Subscribers can see examples of this in the 2013 Q2 Twin Cities Rental Revue in the following sub-regions:
On the flip side we have also seen a trend that when apartments are renting for significantly below the shadow market, there are often substantial increases in apartment rents. However, we have yet to see apartments rent above the shadow market in any sub-region (the ceiling!) for a length of time. Among other factors, evaluating the shadow market ceiling can inform where you set rents at your properties.
